By Ben Morales
Now that the holidays are here, many families are beginning to find their finances stretched thin.
Credit union members are likely to find the additional costs of hosting family gatherings and holiday parties, traveling and buying gifts a major burden. But many credit unions still struggle to meet their members’ needs effectively during this joyful and often expensive time of the year.
As pillars of the community, credit unions have a responsibility to offer their members more innovative tools for addressing this unmet need or risk losing members’ business to payday lenders. One way to do this is to offer short-term, small dollar loans.
Credit union members turn to payday lenders in higher numbers during the holiday to pay for a range of unexpected expenses. The debt accrued by these types of loans often follows consumers into the New Year and can damage members’ financial stability. Since credit unions are more concerned with a member’s long-term financial success, they are the ideal providers of short-term, small dollar loans. Many payday lenders rely on repeat business, but credit unions are more interested in helping members maintain financial stability, which enables members to engage with their credit unions for a wider range of financial services in the future.
While many credit unions shy away from offering small-dollar loans to members, this type of member service adds value to both the credit union and the member. Members are turning to outside companies for these services and often paying high premiums in a fairly short time, but credit unions have an opportunity to offer a better, more efficient alternative that adds revenue to the credit union, while also meeting the community’s needs. Credit unions should see this product offering as both a solution to members’ financial needs and as a profitable service that enhances their revenue stream.
What Many May Not Realize
While many credit unions assume that products like these would only appeal to low-income members who are struggling with the costs associated with the holiday season, these loans are valued product offerings to a wide range of members. Many credit union executives may not realize that members across a broad spectrum of income levels appreciate the flexibility granted by instant liquidity through short-term loans.
For example, even affluent members, who are waiting for a paycheck to clear, would appreciate the financial flexibility to be able to take advantage of Black Friday sales with a short-term loan. Credit unions can gain additional loyalty from their members by offering unique, small-dollar loans.
Credit unions have an opportunity to give back to their communities by offering services that help members during times of potential financial instability. This is a chance to offer a better choice to their members than turning to expensive payday loans. Credit union culture has historically promoted services to help members around the holidays, short-term loan alternatives are another great example of these valued services.
Ben Morales is the CEO of Olympia, Wash.-based QCash Financial, a provider of an automated, cloud-based, mobile lending platform that enables financial institutions to provide short-term loans quickly to the people they serve. For more info: Q-Cash.com